The drop came as trading opened in Asia and Australia on Monday, extending its 2.6% decline from Friday – and spurring expectations that the pound could fall to parity with the US dollar in the coming months.
New fiscal measures to cut taxes, which include scrapping plans to raise corporate taxes and lowering maximum bonuses for bankers, have been criticized as “swinging economies” by the opposition Labor Party, and even members of the chancellor’s Conservative Party. Ceremony.
Former Conservative chancellor Lord Ken Clark criticized the tax cuts on Sunday, saying they could lead to a crash in the pound.
“I’m afraid this is something that is usually tried in Latin American countries without success,” Clark said in an interview with BBC radio.
The British pound was affected by a series of weak economic data, but also the sharp rise of the US dollar, which is a safe investment that sees inflows in times of uncertainty.
The euro also hit a 20-year low of 0.964 per dollar.
But the UK’s economic outlook means that the pound is suffering the most, in the face of a disastrous energy crisis and the highest inflation among the G7 nations.
The previous record low of the British pound against the US dollar was 37 years ago on February 25, 1985, when one pound was equal to $ 1.054.
“If there is any escalation of the war in Ukraine… we will see a further sharp drop in the pound as well as the euro,” said Clifford Bennett, chief economist at ACC Securities, an Australian brokerage.
“The crisis that is going through all of Europe at the moment should not be underestimated and the pound sterling is more vulnerable than most countries,” he said.
Asian markets and currencies are cracking
The US dollar’s rally also dragged the major Asian currencies lower on Monday.
The Chinese yuan fell 0.5% in the internal market to its lowest level in more than 28 months. The offshore yuan fell 0.4%.
Rapid declines prompted the People’s Bank of China to A 20% risk reserve has been imposed on banks’ foreign exchange forward sales to customers as of Wednesday. The move will make it more expensive for traders to buy foreign currencies via derivatives, which could slow the yuan’s decline.
The Korean won also fell 1.6% on Monday against the dollar, falling below the 1,420 level for the first time since 2009.
“Risk sentiment has been dealt a major blow by the latest federal policy actions and guidance,” DBS analysts said in a research report on Monday.
Even without the Fed’s action, DBS analysts said, Europe is eyeing a slump due to the war in Ukraine, and China is eyeing “significantly weak growth dynamics” due to a variety of domestic factors.
“In addition to the sharp drop in US dollar liquidity and the sharp rise in US interest rates, the global economic outlook looks especially precarious,” they added.
“Beer buff. Devoted pop culture scholar. Coffee ninja. Evil zombie fan. Organizer.”